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August 07, 2003
Report Finds Oil Companies' Social and Environmental Practices Unsustainable
    by William Baue

Oekom Research's report criticizes the oil industry's uneven progress in sustainable development, but those in the industry question the report's findings.

The oil and gas industry has been the subject of much attention recently due to its alleged contribution to climate change through its products and processes. However, the sector's contribution to environmental and social problems runs much deeper and wider, according to a report released yesterday by Oekom Research, a Munich-based research firm. Besides climate change, the report focuses on other environmental liabilities such as oil spill rates, gas flaring, and the use of double-hulled tankers, and such social issues as workplace fatalities and human rights abuses in developing countries.

Rated on a scale from A+ to D-, the 26 major global oil and gas companies examined earned an average rating of C in their overall corporate responsibility rating, which assesses both social and environmental issues. Oekom's research influences investment decisions for clients managing 20 portfolios based on sustainability criteria.

"Canada-based Suncor Energy and Italy-based Eni are leading the way in the industry by consistently putting into practice their belief in sustainable development and attaining quantifiable success, for example in reducing emissions," said Evelyn Bohle, the Oekom analyst that wrote the report. "In contrast, ChevronTexaco and the giant of the industry, ExxonMobil (both based in the US), appear to be merely paying lip service to sustainability."

Suncor Energy (ticker: SU) and Eni, which ranked the highest with B- ratings, illustrated best practice in the industry in terms of gas flaring, a phenomenon that contributes to the greenhouse effect.

"In recent years, both companies have been able to cut their gas flaring rate through the implementation of compression or recirculation systems during the course of drilling for crude oil," said Ms. Bohle.

ExxonMobil (XOM) and ChevronTexaco (CVX), which brought up the rear with D+ ratings, lag behind in their response to gas flaring. Oekom reports that less than 50 percent of ChevronTexaco's oil production sites are covered by measures to reduce gas flaring. Stephen Burns, ChevronTexaco's manager of corporate social responsibility (CSR), was unable to respond to's request for his commentary.

ExxonMobil has implemented measures to reduce gas flaring, however, "no detailed information was provided," the report states.

ExxonMobil spokesperson Cynthia Langlands begs to differ.

"Oekom's evaluation of ExxonMobil is not an accurate depiction of our performance," Ms. Langlands told

She points to the company's 2002 environmental performance report, which presents a graph that shows reductions of flaring from about 600 million standard cubic feet per day in 2001 to about 450 million in 2002. The ExxonMobil report admits that last year's gas flaring reductions resulted at least in part from reduced production in Nigeria.

The Oekom report consistently criticizes the presentation of data graphically, which can lead to misreadings.

ExxonMobil and ChevronTexaco also lag on many of the other issues analyzed in the report, along with many of the other companies surveyed. The report considers the industry's performance in production processes "absolutely unsatisfactory," particularly regarding oil spills.

"None of the companies seems to be able to manage their oil operations without causing spills," Ms. Bohle writes in the report.

The report singles out ExxonMobil and ChevronTexaco for failing to publish information on oil spill rates. However, while ExxonMobil does not report its oils spills in terms of volume, which prevents an extrapolation of its oil spill rate, the report acknowledges that the company does provide information in other forms about oil spills.

"Our corporate spill rate is about 6 teaspoons per million gallons transported," said Ms. Langlands. "Since 1996, the number of spills from marine vessels has been reduced more than 70 percent to only five incidents world-wide in 2002."

"In fact, our international shipping affiliate operated 42 consecutive months without a reportable spill," Ms. Langlands added. "It did so while making 3,400 port calls and transporting more than 1 billion barrels with spill losses of less than 1.3 barrels."


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